Question

Highland Company produces a lightweight backpack that is popular with college students. Standard variable costs relating to a single backpack are given below: Standard Quantity or Hours Standard Price Or Rate $4.50 per yard Standard Cost Direct materials Direct labor Variable manufacturing overhead Total standard cost per unit $ 2 per direct labor-hour Overhead is applied to production on the basis of direct labor-hours. During March, 530 backpacks were manufactured and sold. Selected information relating to the month's production is given below: Materials Used $ 9,540 $ 8.645 Direct Labor $5,936 Variable Manufacturing Overhead $1,484 $1,690 Total standard cost allowed retual costs incurred Materials price variance Materials quantity Variance Labor rate variance Labor efficiency variance Variable overhead rate variance Variable overhead officiency variance $ 1,575 U "For the month's production. The following additional information is available for March's production:

Answer 1

1.

Total standard cost for 530 backpacks

= Total standard material + total standard labor + total standard MOH

= $ 9,540 + $ 5,936 + $ 1,484 = $ 16,960

Standard cost for single backpack = Total standard cost for 530 backpacks /530

                                                      = $ 16,960/530 = $ 32

2.

Actual cost per back pack produced

= Standard cost – Cost difference between actual and standard backpack

= $ 32 - $ 0.20 = $ 31.80

3.

Material required for 530 backpack = Total standard material cost/Standard cost per yard

                                                     = $ 9,540/$ 4.50 = 2,120 yards

Material required for single backpack = Material required for 530 backpack/530

                                                           = 2,120/530 = 4 Yards

4.

Total material variance = Actual material cost incurred – Total standard cost allowed

                                    = $ 8,645 - $ 9,540 = - $ 895 F

Total material variance = Material price variance + Material quantity variance

            - $ 895 = Material price variance + $ 1,575

          Material price variance = - $ 895 - $ 1,575     

          Material price variance = - $ 2,470    F

5.

Standard MOH = $ 2 PLH

Total standard LH = Total standard MOH/ Standard MOH PLH

                             = $ 1,484/$ 2 = 742 PH

Standard labor rate = Total standard labor cost/ Total standard LH allowed

                                = $ 5,936/ 742 = $ 8